The ResMed Inc (ASX: RMD) share price is on watch this morning after announcing growth in its FY21 second quarter.
ResMed is a healthcare business that specialises in treating sleep apnea. It’s involved in helping COVID-19 patients with its breathing masks. ResMed also has a digital health division.
ResMed’s FY21 second quarter
The healthcare share said that in the second quarter its revenue increased by 9% to US$800 million, up 7% on a constant currency basis. The GAAP (generally accepted accounting principles) gross margin was 57.8%, with the non-GAAP margin rising by 20 basis points to 59.9%.
ResMed’s net operating profit rose 12% and non-GAAP operating profit went up 17%.
Revenue in the US, Canada and Latin America, excluding software as a service (SaaS), went up 5% driven by strong sales across the mask product portfolio. Revenue in Europe, Asia and other markets grew by 10% on a constant currency basis, primarily driven by the device and mask product portfolio. SaaS revenue increase 6% due to continued growth in resupply service offerings and stabilising patient flow in out-of-hospital care settings.
ResMed CEO Mick Farrell said: “Our second quarter results reflect continued solid performance and positive trends across our business resulting in top line growth as well as double-digit improvement in operating income and earnings per share.
“We have continued to invest in focused R&D programs in digital health and core medtech innovation to help accelerate our ResMed growth strategy.”
The ResMed board also declared a quarterly cash dividend of US$0.39 per share.
ResMed half year performance
For the six months ending 31 December 2020, ResMed said that its revenue rose 10% to US$1.55 billion. The GAAP gross margin improved to 58.1% and the non-GAAP gross margin increased to 59.9%.
GAAP net operating profit went up 19% and non-GAAP net operating profit rose 20%. This adds onto the profit made in FY20.
Summary thoughts
ResMed continues to deliver profit growth, it’s a quality business. If I were a long term shareholder I’d be happy with this update.
However, at 41 times the estimated earnings for the 2021 financial year (according to CommSec estimates), it looks pricey. But low interest rates go some way justifying this high earnings multiple. I wouldn’t call it a clear buy right now.
But there are other ASX growth shares in the healthcare space I’d rather buy like Volpara Health Technologies Ltd (ASX: VHT).
